On Tuesday, Apple AAPL revealed a significant partnership with Broadcom AVGO to collaborate on the development of 5G radio frequency components within the United States. The multi-billion dollar deal involves Broadcom working alongside Apple to create and manufacture these components in various American facilities, including their prominent factory in Fort Collins, Colorado.
Following the announcement, shares of Broadcom experienced about a 2.2% increase, reaching an all-time high. The market responded positively to the news, reflecting the favorable perception and confidence in Broadcom's prospects as a result of this development.
Let’s Dive into the Deal
According to an article on Reuters, Apple specifically highlighted its intention to leverage Broadcom's expertise in film bulk acoustic resonator (FBAR) chips. These FBAR chips play a crucial role in the radio-frequency system, enabling seamless connectivity between iPhones and other Apple devices and mobile data networks.
This development signifies the continuation of a longstanding partnership between Apple and Broadcom. Notably, in 2020, Broadcom had disclosed its plans to supply Apple with $15 billion worth of wireless components. As part of the new deal, Apple will not only benefit from Broadcom's components but also utilize the collaboration to invest in important automation projects and skill development for engineers and technicians.
The partnership is mutually beneficial, as Apple's existing support for over 1,100 jobs at Broadcom's Fort Collins, CO facility further strengthens their collaboration in FBAR filter manufacturing. In its most recent two fiscal years, Apple has emerged as a significant revenue contributor for the chipmaker, with roughly 20% of its total revenue stemming from its role as a major supplier of wireless components to Apple.
ETFs in Focus
Below, we highlight a few ETFs with exposure to Broadcom.
iShares U.S. Tech Independence Focused ETF (IETC)
The fund employs an active strategy and has a basket of 163 securities. IETC has a major allocation in the software and services sector, with 42.09% of the assets. It has an exposure of 12.02% in Broadcom, but the top allocation is in Microsoft MSFT, with 14.82%.
The fund has amassed an asset base of $133.63 million and charges an annual fee of 0.18%. IETC has generated 21.90% year to date and is up 14.60% over the past year.
Pacer Data and Digital Revolution ETF (TRFK)
The Pacer Data and Digital Revolution ETF seeks to track the total return performance of the Pacer Data Transmission and Communication Revolution Index. The fund has a basket of 80 securities with a tilt toward information technology, having a share of 91.77%. TRFK has 9.92% of its assets allocated to Broadcom, with NVIDIA NVDA being the top allocation having a share of 10.34%.
The fund has gathered $1.09 million in its asset base and charges an annual fee of 0.60%. TRFK has a Zacks ETF Rank #3 (Hold) and has generated 24.99% year to date. The fund has given returns of 13.31% over the past three months.
First Trust Nasdaq Semiconductor ETF (FTXL)
The First Trust Nasdaq Semiconductor ETF seeks investment results that generally correspond to the performance of the Nasdaq US Smart Semiconductor Index, which provides exposure to U.S. companies within the semiconductor industry.
It has a basket of 31 securities, with 79.07% of the assets allocated to the semiconductor sector. FTXL has an exposure of 8.83% to Broadcom, with the highest allocated company being Intel INTC, with 9.05%.
It has gathered an asset base of $995.72 million and charges an annual fee of 0.60%. Having a Zacks ETF Rank of #3 (Hold), the fund has earned 18.84% year to date and 6.67% over the past year.
IShares Semiconductor ETF (SOXX)
The iShares Semiconductor ETF seeks to track the investment results of ICE Semiconductor Index composed of U.S. equities in the semiconductor sector. Having 30 securities in its basket, the fund has major allocation to the semiconductor sector, with 79.67% of the assets of the fund. Broadcom takes up the second place in the list of holdings, with 8.41%. NVIDIA is the top allocation, with 9.89% of the assets.
SOXX has amassed an asset base of $7.97 billion and charges an annual fee of 0.35%. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook. It has generated returns of 27.98% year to date and 13.30% over the past year.
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